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Your firm would like to evaluate a proposed new operating division. You have forecasted cash flows for this division for the next five years, and have estimated that the cost of capital is 10%. You would like to estimate a continuation value. You have made the following forecast for the last year of your five year forecasting hormonin milions of dollars Years Heves 5270.8 Operating income Nel income 352 Free cash fows 99.4 Book of equity 120.7 Note: Assume that al firms including yours) have no debe 2. You forecast that refree cash flows her year 5 wil grow at 2% per year, forever. Estimate the continuation value in your Susing the perpely with growth formula What is in the camera in Thai 10 Foto that we will them the You forecast future tree cash flow sterows wil grow at 2% per year, forever. Estimate the continuation value in your sing the perpetuty with growth formula The continuation value in year 5 niton (Round to ore decimal place) b. You have identified ve fos in the sandstry as your pering division. The rage Prato for the fans is 18. Estimate the condition au sering the PEx your on in years will be the same as the average PIE ratio for the comparable from today The continuation of in year is million (Round to one decimal place) 52706 Your fem would like to evaluate a proposed new operating division. You have forecasted cash flows for this division for the next five years, and have estimated that the cost of capital is 14%. You would like to estimate a continuation value. You have made the following forecasts for the last year of your five-year forecasting horizon (in millions of dollars Years Revers Operating income 542 Net income 352 Free cash flows Book value of equity 120.7 Note: Assume that firms including yours) have no det 2. You forecast that future free cash fows after years will grow at 2% per year, forever. Estimate the continuation value in year 5, using the perpetuty with growth formula You widentified real firms in the ministre du Parti division The Proin fre the firmek 10. Flimate the continuation when in the Profour vision in war will be them the PE 2. You forecast that future free cash flows after year 5 wil grow at 2% per year, forever. Estimate the continuation value in year 5, using the perpetuty with growth formula The continuation value in year 5 is million (Round to one decimal place) b. You have identified several frems in the same industry as your operating division. The weapo PRE ratio for these firme is 19. Estimate the continuation value assuming the PIE ratio for your vision in year 5 will be the same as the average PE ratio for the comparable fomsday The continuation value in year 5 1 $.million (Round to one decimal place.) Enter your answer in each of the answer boxes Your firm would like to evaluate a proposed new operating division. You have forecasted cash flows for this division for the next five years, and have estimated that the cost of capital is 14%. You wike to in a contine You have made the following forecast for the last year of your five year forecasting horizons of dollars Years Operating income 542 Ne income 352 Frechos 99.4 Book value of equity 1207 No. Asume that many yours) aveno a. You forecast that future free cash flows after year 5 wil grow at 2% per year, forever. Estimate the continuation value in your s, using the perpily with grow formula Wheeft in het einen The Promis 1 Feat that the ratio wewnina will be the came the a. You forecast that our free cash fows ater years will grow at 2% per year, forever. Estimate the continuation value in your wing the perpetuty with growth forma The continuation value in your smilion Hound to one decimal place) b. You have identifed several time h the same industry as your operating division. The average Pretrato for these fools 18. Estimate the continuation value uuring the Pre ratio for your chunkon in you will be there in the war Pe The continuation value in year a $milion Round to one decimal place)
